This document provides an overview and comparison of three portfolio analysis models: the BCG Growth-Share Matrix, GE's 9-Cell Matrix, and Hofer's Life-Cycle Matrix. It summarizes the key dimensions and classifications of each model, and notes their strengths and weaknesses. Specifically, it notes that the GE 9-Cell Matrix provides a more comprehensive analysis but without clear strategic guidance, while Hofer's model aims to identify developing winners across industry life cycle stages. The document also provides an unweighted example analysis of industry and business factors for a hypothetical business unit.

1. PRESENTATION
PREPARED BY :-
JASPINDER SINGH

2. CONTENTS
BCG MATRIX
GE9 CELL MATRIX
HOFER’S MODEL

3. BCG MATRIX

4. EVALUATING DIVERSIFIED PORTFOLIOS
THE BCG GROWTH-SHARE MATRIX (Boston Consulting Group)
DIMENSIONS
Industry Growth Rate
Compared to GDP
Relative Market Share
Uses ratios instead of absolute market shares
CLASSIFICATIONS
Question Marks (or Problem Children or Wildcats)
Stars
Cows
Dogs
ADVANTAGES & IMPLICATIONS
It is quantifiable and easy to use
Easy to remember terms and their meaning when referring to business units
Each business unit moves across the matrix in predictable ways over time
Focuses attention on cash flows and needs

5. WEAKNESSES IN THE BCG GROWTH-SHARE MATRIX
TOO SIMPLISTIC—IT ONLY HAS A FOUR-CELL MATRIX
WHERE DO “AVERAGE” BUSINESSES BELONG?
PREJUDICIAL CLASSIFICATION SCHEME
DOGS & PROBLEM CHILDREN v. STARS & COWS…VERY BIASED TERMS
THE TRENDS & MOVEMENTS OF THESE UNITS SEEM MORE IMPORTANT
DOES HIGH MARKET SHARE ALWAYS MEAN HIGH PROFITABILITY?
FIRMS CAN LOSE MONEY WHILE HOLDING A LARGE MARKET SHARE
LOW-SHARE BUSINESSES CAN ALSO BE PROFITABLE
ONLY CONSIDERS RELATIONSHIP TO THE MARKET LEADER—WHILE OTHERS ARE IGNORED
WHAT ABOUT SMALL COMPETITORS WITH FAST-GROWING MARKET SHARES?
GROWTH RATE IS ONLY ONE ASPECT OF INDUSTRY ATTRACTIVENESS
MARKET SHARE IS ONLY ONE ASPECT OF OVERALL COMPETITIVE POSITION

6. THE BCG GROWTH-SHARE MATRIX

7. GE 9 CELL MATRIX

8. TWO DIMENSIONS
(McKinsey & Co)
Industry Attractiveness
MARKET SIZE & GROWTH RATE
INDUSTRY PROFITABILITY
INTENSITY OF COMPETITION
BARRIERS TO ENTRY / EXIT
TECHNOLOGICAL & PRODUCT CONSIDERATIONS
CAPITAL REQUIREMENTS
EMERGING OPPORTUNITIES & THREATS
SOCIAL, ENVIRONMENTAL, & POLITICAL FACTORS

9. Business Strength / (Competitive Position)
RELATIVE MARKET SHARE
RELATIVE PRICE, QUALITY, & SERVICE v. RIVALS
PROFIT MARGINS and COST POSITION v. RIVALS
KNOWLEDGE OF CUSTOMERS & MARKETS
TECHNOLOGICAL CAPABILITY & LEADERSHIP
FINANCIAL & PHYSICAL RESOURCES
CALIBER OF MANAGEMENT & STAFF
COMPETENCIES MATCH KEY SUCCESS FACTORS

11. STRENGTHS
 Uses more comprehensive measures and variables in assessing industry
attractiveness and business strength / competitive position.
 It does not lead to as simplistic conclusion as the BCG grid.
 In this 9 cell approach allows for intermediate rankings between high
/low and strong / weak .
 It stresses channeling of resources to areas with the greatest probability
of achieving competitive advantage and superior performance .

12. WEAKNESS OF GE 9 CELL MATRIX
WEAKNESSES :-
 It provides no real guidance on the specifics of what strategy
to follow ….its too general.
 It cannot spot units that area about to become winners
because their industries are entering the takeoff stage.
 The use of numeric estimates seems objective, but is really
very subjective.

13. Brief History- hofer matrix
The principal purpose of analysis for strategic planning is to identify the
major opportunities and threats a business unit faces in the future and to
identify the skills around which it can develop a strategic intelligence plan
to exploit the opportunities and negotiate around the threats.
 Hofer and Schendel felt that the major weakness with the General
Electric business screen was that it didn’t effectively depict the positions
of new businesses that are just starting to grow in new industries.
 They suggested in 1975 that changes in basic competitive positions are
easier to accomplish at certain stages in the evolution of an industry than
others.

14. THE HOFER LIFE-CYCLE MARKET EVOLUTION MATRIX
TWO DIMENSIONS (Charles Hofer & A. D. Little, Co)
Stage of Industry / Market Evolution
EARLY DEVELOPMENT
RAPID GROWTH / TAKE-OFF
SHAKE-OUT
MATURITY / SATURATION
DECLINE / STAGNATION
Business Strength / (Competitive Position)
SAME DIMENSIONS AS USED IN THE GE BUSINESS SCREEN
ADVANTAGES
Can be used to identify and track developing winners
Illustrates how the firm’s businesses are distributed across the stages of industry
evolution

15. THE HOFER LIFE-CYCLE MARKET EVOLUTION MATRIX
BUSINESS STRENGTH / COMPETITIVE POSITION
STRONG AVERAGE WEAK
EARLY -----------------------------
-
DEVELOPMENT
-----------------------------
-
STAGE OF RAPID GROWTH /
TAKE-OFF
INDUSTRY / MARKET ------------------------------
SHAKE-OUT
EVOLUTION
-----------------------------
-
MATURITY /
SATURATION
-----------------------------
-
DECLINE /
STAGNATION
-----------------------------
-
ONLY ONE DIMENSION IS DIFFERENT FROM THE GE BUSINESS SCREEN
Except for the Stage of Market Evolution, this model is identical to the GE Business
Screen

16. IN SUMMARY: USING PORTFOLIO ANALYSIS
PROS AND CONS
STRENGTHS
• It encourages top management to evaluate each line of business
separately , and to set objectives and allocate resources to each .
• It stimulates the use of externally oriented data to supplement
management judgment.
• It raises the issue of cash flow availability for use in expansion and
growth .
• It graphically communicates the mix of business in which part firm has
invested in .

17. IN SUMMARY: USING PORTFOLIO ANALYSIS
CONS
WEAKNESSES
• Defining product or market segments is very difficult .
• It suggests standard strategies that can miss opportunities or be impractical.
• It provides an illusion of scientific rigor ,when positions are really based
on subjective judgments.
• It does not always make clear that what makes an industry attractive and
where a product is in the life cycle.
• Following portfolio prescription may reduce profits – dogs can make
money!

18. EVALUATING INDUSTRY ATTRACTIVENESS
(UNWEIGHTED)
INDUSTRY FACTOR CLASSIFIED AS
MARKET SIZE & GROWTH RATE AVERAGE
INDUSTRY PROFITABILITY ATTRACTIVE
INTENSITY OF COMPETITION UNATTRACTIVE
BARRIERS TO ENTRY/EXIT UNATTRACTIVE
SEASONALITY/CYCLICALITY AVERAGE
TECHNOLOGY & PRODUCT CONSIDERATIONS AVERAGE
CAPITAL REQUIREMENTS UNATTRACTIVE
EMERGING OPPORTUNITIES & THREATS AVERAGE
SOCIAL, REGULATORY, & POLITICAL FACTORS AVERAGE
STRATEGIC FIT WITH OTHER CURRENT LINES OF BUSINESS ATTRACTIVE
OVERALL EVALUATION = AVERAGE

19. EVALUATING BUSINESS STRENGTH /
COMPETITIVE POSITION
(UNWEIGHTED)
USE THE FOLLOWING SCHEME TO CLASSIFY EACH BUSINESS STRENGTH FACTOR…
STRONG
AVERAGE
WEAK
---------------------------------------------------------------
BUSINESS STRENGTH FACTOR
CLASSIFIED AS
OUR RELATIVE MARKET SHARE STRONG
OUR RELATIVE PRICE v. RIVALS AVERAGE
OUR QUALITY & SERVICE v. RIVALS AVERAGE
OUR RELATIVE COST POSITION v. RIVALS STRONG
OUR PROFIT MARGINS v. RIVALS STRONG
KNOWLEDGE OF CUSTOMERS & MARKETS AVERAGE
TECHNOLOGICAL CAPABILITY / LEADERSHIP WEAK
FINANCIAL & PHYSICAL RESOURCES AVERAGE
CALIBER OF MANAGEMENT & STAFF STRONG
COMPETENCIES MATCH KEY SUCCESS FACTORS AVERAGE
OVERALL EVALUATION = AVERAGE to STRONG

20. WHICH BUSINESS UNITS HAVE THE BEST/WORST
PERFORMANCE?
ASSESS THE TRENDS RE :
Sales Growth
Profit Growth
Contribution to Company Earnings
Return on Capital Invested in the
Business (ROA)
Cash Flow Generated